Economists undaunted by burgeoning UK trade gap

ECONOMISTS yesterday forecast a pick-up in export activity despite Britain’s trade gap with the rest of the world widening more than expected.

Official figures showed that the trade deficit on goods and services rose to £3.4 billion in February, up from £2.5bn the previous month and bigger than the £2bn expected by the City.

Despite the eurozone debt crisis, the trade gap in goods with countries in the EU narrowed. However, there was a worrying 9 per cent slump in exports to non-EU nations, with fewer cars being sent to China, Russia and the US.

The Office for National Statistics also revised up the trade deficit for January, dealing a blow to the coalition government’s hopes for an export-led recovery.

Rob Harbron, an economist at the Centre for Economics and Business Research (CEBR), said the figures would prove “worrying for UK policymakers” but suggested that weak sterling and global growth would support medium-term prospects.

He said: “CEBR’s view is that export growth will pick up again over the medium term. Continued weakness in the value of the pound alongside an improvement in the global economic outlook will support demand for goods and services. The UK could export its way to growth yet.”

Lee Hopley, chief economist at manufacturers’ organisation EEF, believes UK firms will successfully secure more orders overseas.

“Whilst the drop in exports in February was driven by weakness in non-EU demand, this contrasts with the underlying trend of strong growth to these markets over the past two years.”

Recent business surveys, including the latest Scottish Chambers of Commerce report, have painted a broadly optimistic picture for exporters. Most analysts still expect modest GDP growth in the first quarter.